NFIB's Small-Business Confidence Sputters, Again

After Gains in April and May, Index “Gives Up” in June.

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After two months of incremental but solid gains, the Index gave up in June. This appears par for the course, given that there is no reason for small employers to be more optimistic and lots of things to worry about...

Washington, DC (PRWEB) July 09, 2013

Small-business optimism remained in tepid territory in June, as NFIB’s monthly economic Index dropped just under a point (0.9) and landed at 93.5, effectively ending any hope of a revival in confidence among job creators. Six of the ten Index components fell: two rose and two were unchanged. While job creation plans increased slightly in June, expectations for improved business conditions remained negative. The Index—which was 12 points higher in June than at its lowest reading during the Great Recession but 7 points below the pre-2008 average and 14 points below the peak for the expansion—has been teetering between modest increases and declines for months.

“After two months of incremental but solid gains, the Index gave up in June. This appears par for the course, given that there is no reason for small employers to be more optimistic and lots of things to worry about,” said NFIB chief economist Bill Dunkelberg. “Washington remains bogged down in scandals and confidence in government’s ability to deal with our fundamental problems remains low. Economic growth was revised down for the first quarter of the year and the outlook for the second quarter is not looking good. Nothing cheers up a small-business owner more than a customer, and they remain scarce and cautious while consumer spending remains weak and more owners are reporting negative sales trends than positive ones. It certainly doesn’t help that the endless stream of delays and capitulations of certain provisions of the healthcare law adds to the uncertainty felt by owners. Until growth returns to the small-business half of the economy, it will be hard to generate meaningful economic growth and job creation.”

The top business problems for small-business owners in June were taxes and regulations and red tape, with 20 percent of those surveyed ranking each as their No. 1 problem. Another 18 percent of owners cited weak sales as their top problem, but only 2 percent reported that financing was a major concern.

  •     Job Creation. Small-business owners were not able to contribute to job growth again in June, with the average increase in employment coming in at a negative 0.09 workers per firm, essentially zero. While 360,000 new part-time jobs were added, about 240,000 full-time jobs disappeared.
  •     Hard to Fill Job Openings. Nineteen (19) percent of all owners surveyed reported job openings they could not fill in the current period (unchanged). Twelve (12) percent of owners reported using temporary workers, little changed over the past 10 years. The health care law provides incentives to increase the use of temporary and part-time workers, but this indicator has not registered a trend toward the use of more temps.
  •     Sales. The net percent of all owners* reporting higher nominal sales in the past three months compared to the prior three months gave up 4 points, falling to a negative 8 percent. The net percent of owners expecting higher real sales volumes lost 3 points, falling to 5 percent of all owners. The poor expectations do not anticipate new employment or new orders for inventories.
  •     Earnings and Wages. Reports of positive earnings trends deteriorated 1 point in June to a negative 23 percent. Four percent of owners reported reduced worker compensation and 19 percent reported raising compensation, yielding a seasonally adjusted net 14 percent reporting higher worker compensation (down 2 points). A net 6 percent of those surveyed plan to raise compensation in the coming months, down 3 points.
  •     Credit Markets. Credit continues to be a non-issue for small employers, five percent of whom say that all their credit needs were not met in June, unchanged from May. Twenty-nine (29) percent of owners surveyed reported all credit needs met, and 53 percent explicitly said they did not want a loan (67 percent including those who did not answer the question, presumably uninterested in borrowing).
  •     Capital Outlays. In June, the frequency of reported capital outlays over the past six months fell 1 point to 56 percent, 9 points below the average spending rate through 2007. The percent of owners planning capital outlays in the next three to six months was unchanged at 23 percent. The frequency of expenditures remained at the high end of recession-level readings, but there is no surge in capital spending on the horizon.
  •     Good Time to Expand. In June, only Seven percent characterized the current period as a good time to expand facilities (down 1 point). The net percent of owners expecting better business conditions in six months was a net negative 4 percent, a 1 point improvement.
  •     Inventories.

o    The pace of inventory reduction continued in June, with a net negative 7 percent of all owners reporting growth in inventories, unchanged from May. For all firms, a net negative 2 percent (down 3 points) reported stocks too low, a sharp deterioration from May and consistent with weak spending which produces a buildup in stocks.
o    Plans to add to inventories declined sharply; the net percent of owners planning to add to inventories fell 4 points to a negative 1 percent of all firms.

  •     Inflation. Twelve (12) percent of the NFIB owners surveyed reported reducing their average selling prices in the past three months (down 4 points), and 19 percent reported price increases (unchanged). The net percent of owners raising selling prices was 8 percent, up 6 points. As for prospective price increases, 19 percent plan on raising average prices in the next few months (up 2 point), and 3 percent plan reductions (unchanged). A net 18 percent plan price hikes, up 3 points.

Today’s report is based on the responses of 662 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of June. Download the complete study at http://www.nfib.com/sbetindex.

*All net percentages seasonally adjusted unless otherwise noted.

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NFIB’s Small Business Economic Trends is a monthly survey of small-business owners’ plans and opinions. Decision makers at the federal, state and local levels actively monitor these reports, ensuring that the voice of small business is heard. The NFIB Research Foundation conducts some of the most comprehensive research of small-business issues in the nation. The National Federation of Independent Business is the nation’s leading small-business association. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals.


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